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Healey urges: Shut down competitive electric market

By Colin A. Young, State House News Service

Updated:
03/30/2018 09:19:12 AM EDT

BOSTON -- Saying that the industry has preyed upon elderly and low-income residents for too long with aggressive and deceptive practices, Attorney General Maura Healey on Thursday called for the end of the competitive electricity supply market for residential customers.

Electric customers in Massachusetts who switched to a competitive electric supplier paid $176.8 million more than they would have had they stayed with their utility company from July 2015 to June 2017, the two-year period during which Healey's office was investigating the industry, her office announced.

"We're gathered here today to take a stand against an industry that has abused and overcharged Massachusetts for way too long," Healey said, flanked by Quincy Mayor Tom Koch and an affected consumer from Middleborough. "Many of you have heard about these companies, they go door to door, send letters in the mail and call over and over again with promises of cheaper electricity or a locked-in, low rate that they claim will save you money."

She added, "Hundreds of thousands of residents aren't paying less on their electric bills, they're paying more. In fact, they're paying a lot more."

Healey said she plans to work with the Legislature, the Department of Public Utilities and the energy industry "to close down the market for individual residential competitive electric supply in Massachusetts."

Nearly 500,000 Massachusetts residents get their electricity from a competitive supplier, an option created under a 1997 law that deregulated the state's electricity generation industry.

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She said her office received more than 700 complaints about competitive electric suppliers in the last three years.

"As this report shows, the competitive supply market has not and will not provide savings to residential customers in Massachusetts, and therefore we're making the recommendation that this industry -- that portion of the industry -- end," Healey said Thursday.

One common practice of competitive electric suppliers, Healey said, is to "offer an initial low rate that balloons of course in time to a rate much higher than the utility basic service rate."

"Door-to-door competitive electric suppliers have been such a problem in our city that the Quincy Police Department has issued warnings to the public," Koch said. "For too long, these companies have sold Quincy residents, particularly seniors, a bill of goods."

Asked whether the problem is that the competitive suppliers lock their customers into a rate just below the basic service rate -- which changes every six months -- to make it appear to be a better deal than it actually is or that they promise one rate and charge another altogether, Healey said, "both."

Kristen Ruggiero of Middleboro said that she signed up with a competitive electric supplier after a friend told her that Ruggiero would earn passive income if she signed up five other people. She soon realized it was a pyramid scheme and tried to opt out. Ruggiero said she contacted the attorney general's office about the situation in 2014.

"I thought I would get great rates, I had a lock-in for six months and within four months they went up on our rates," she said. "I couldn't get in touch with them, tried an email and got a canned email back and never heard from anybody. We just had a really hard time getting out of our contracts."

The state Department of Public Utilities licenses the competitive electric suppliers operating in Massachusetts, but says on its website, "we do not oversee or regulate how they set their supply product prices."

The attorney general's office report found that 36 percent of low-income households received their electricity from a competitive supplier -- double the rate among other customers.

"Over and over and over again we found that these companies focused on signing up people who could least afford it," Healey said. "They targetted families having the most trouble paying their bill every month."

On average, the attorney general said, customers who switched to a competitive supplier paid $230 more per year.

Healey said she is not suggesting the Legislature bring an end to the entire competitive electric supply industry. While competition in the residential industry has been "a really bad deal for individual residential ratepayers," Healey said that "competitive supply has been a good thing for commercial and industrial ratepayers in Massachusetts, and many towns have municipal buying programs that they're proud of."

She said the changes she proposed would not affect municipal aggregation programs.

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